Does the valuation report provide sufficient reasoning and rationale to support its findings?  This is a key question to ask when reviewing a given that business valuations are somewhat subjective in nature. Step 9 to reviewing a business valuation report involves assessing the reasonableness of the value conclusions, including the implied intangible value, and/or identifying what reasonableness testing the valuator used to support his/her findings.  Here are 6 reasonableness tests to cons...

Income tax considerations are vital to conducting a .  Step 8 to reviewing a business valuation report involves ensuring the value conclusion incorporates the relevant income tax considerations. The value of an operating business is dependent on its ability to generate discretionary after-tax cash flows.  In cases where business value is driven by the underlying asset values, such as real estate holding companies, important income tax considerations must also be taken into consider...

Does the company own assets that are not integral to the business operations or required to generate revenues?  If so, have these assets been appropriately reflected in the ? Step 7 to reviewing a business valuation report involves identifying any redundant assets the business owns and ensuring they have been valued separately and added to the value of the business operations otherwise determined. Redundant assets are defined as tangible and identifiable intangible assets that are not req...

Do you need a superstar sales rep to build your business for a ? Actually, you should avoid the trap of relying on one superstar sales rep if you want to maximize the value of your business.  To maximize value, a seller must be confident that the company will continue to generate sales after you are gone.  Many business owners think that hiring one superstar salesperson to replace themselves as a rainmaker is the answer.  Doing so, however, may simply trade a dependence on you to dependenc...

All business owners will one day .  For those that are prepared this will occur voluntarily, on their terms at a time of their choosing.  For many business owners, however, this will occur involuntarily due to burnout, illness, disability, divorce or death. Are you looking to sell your business within the next five years?  If so, the time to act is now.  You and your business need ample time to prepare for this event – and there are things business owners need to know before even co...

Is the valuation based on a going concern income-based approach such as a discounted cash flow approach (DCF) or capitalized cash flow approach (CCF)?  If so, what discount rates or capitalization rates are the value conclusions based upon? Step 6 to reviewing a involves assessing the reasonableness of the selected discount rates or capitalization rates (or "cap rates"). Although discount rates and cap rates are related terms, they are not interchangeable.  For clarification, each of th...

Is the ?  If so, what future cash flow assumptions are the value conclusions based upon? The reasonableness of the underlying cash flow assumptions can significantly affect the integrity of the resulting value conclusions.  Under common income-based valuation approaches, the business valuator must select an operating cash flow level (or range) that he/she expects the business to generate going forward.  The cash flows may vary from year to year over a specific projection period or an on...

How many different are there?  How does a valuator select which valuation approach to apply?  What if the valuator adopted an incorrect valuation approach? The business valuator is responsible for selecting an appropriate valuation approach and for ensuring that it has been correctly applied.  Step 4 to reviewing a business valuation report involves identifying and assessing the valuation approach adopted by the valuator. In valuing a business, there are many valuation approaches to sel...

How reliable is a valuation that was rendered based on a restricted or limited scope of review? Is the quality of a affected by the extent to which the valuator was restricted from examining certain key documents and/or interviewing key parties? The third step to reviewing a business valuation report involves identifying any major scope limitations, restrictions and qualifications rendered on the value conclusions. This helps ascertain whether or not the valuator conducted sufficient work to...

VSP professionals co-author Chapter 27 - The Importance and Role of Business Valuations and Exit Planning in "Advisors Seeking Knowledge - A Comprehensive Guide to Succession and Estate Planning", published by Lexis Nexis 2012. to Download Release info.